News Excerpt:

The Department of Fertilisers (DoF) issued detailed guidelines for the evaluation of “reasonableness” of the maximum retail price (MRP) for all non-urea fertilisers covered under Nutrient-based Subsidy (NBS) scheme.

More about news:

The government has brought di-ammonium phosphate (DAP), muriate of potash (MOP) and all other such fertilisers that receive NBS support under “reasonable pricing” controls.

About NBS:

• NBS fertilisers — unlike urea, whose MRP is fixed by the government — are technically decontrolled. 
• Under the NBS scheme, introduced in 2010, their MRPs are supposed to be market-determined and set by the individual companies selling them. 
• The government merely pays a fixed per-tonne subsidy on each of these fertilisers, linked to their nutrient content or specific percentage of nitrogen (N), phosphorus (P), potassium (K) and sulphur (S).

Department of Fertilisers (DoF) guidelines:

• Profit margins: The guidelines, to be effective retrospectively from April 1, 2023, have prescribed maximum profit margins that will be allowed for fertiliser companies – 8% for importers, 10% for manufacturers and 12% for integrated manufacturers (those producing finished fertilisers as well as intermediates such as phosphoric acid and ammonia).
• Companies earning “unreasonable profit”, i.e. over and above the stipulated percentages, in a particular financial year (April-March) will have to refund the same to the DoF by October 10 of the following fiscal year. 
• Indirect MRP: The new guidelines impose indirect MRP controls on non-urea fertilisers by capping the profits that companies can earn from their sales. These will be based on their “total cost of sales”, which would cover cost of production/ import, administrative overheads, selling and distribution overheads, and net interest and financing charges. 
• Deduction for dealer’s margin will be allowed to the extent of 2% of the MRP for DAP and MOP, and 4% for all other NBS fertilisers.
• Reasonability of MRPs: The guidelines have mandated fertiliser companies to “self-assess” unreasonable profits, based on the cost auditor’s report along with audited cost data approved by their board of directors. This report and data has to be furnished to the DoF by October 10 of the following fiscal year. 
• The DoF will then scrutinise the “reasonability of MRPs”, as submitted by the companies, “by 28th February for each completed previous financial year (i.e. for FY 2023-24 by 28th February 2025)”.
• Following that, it will finalise a report on unreasonable profits earned, if any, to be recovered from the companies.

Conclusion:

The new guidelines basically extend the regime of detailed cost monitoring and price control currently applicable on urea to other fertilisers. With the MRP of urea per tonne remained unchanged since 2012, only change that has taken place is companies being permitted to charge 5% extra for neem-coating of urea, made mandatory from 2015 and Non-urea fertilisers already under informal price control. The new guidelines will definitely help in controlling the prices of fertilisers.